The Grayling

Arlen Specter is Alcibiades

2010-02-02T10:00:00.000-05:00

without Alcibiades occasional flashes of brilliance.

Comment on Pension Pulse blog

2010-02-02T09:11:00.002-05:00

Pension Pulse has a post, "Pensions filling the infrastructure gap?" It does not allow comments, but here's mine.

I was formerly a manager & analyst of public securities in emerging markets for one of the big pension funds. We had people in the PE departments working on this. My experience with single-purpose public infrastructure securities (i.e. shares in one airport, one port, one road) had disappointing performance but securities of companies that developed, operated, and invested in portfolios of these things for growth performed well. I wanted Cheung Kong Infrastructure, but not Shekou Port, for example.

State by State, Year by Year, Employment by Sector & by Blue-Red Political Alignment [bumped]

2010-01-26T13:21:00.001-05:00

This preliminary study started with a blog post I did several months ago entitled "New Jersey, the Sorry State", a deep dive into Bureau of Labor Statistics data showing that my state is hardly generating employment outside the government sector.

The blame for this sorry state of affairs I heaped on NJ's political culture, which is high-taxing, heavily-regulating, pro-union, anti-business, and Democrat-dominated. As the power of Democrats, the self-proclaimed friends of the working man, has risen in this state, fewer working men have actually had work.

One of my readers suggested extending the work to all states. A daunting prospect, but I have made a start. It's back to the BLS data for 51 deep dives. This time I'm looking longer term, with data from 1990 to the present.

To try to get to grips with party politics in all states through time, I researched affiliations of the governor and two senators and the plurality of the House of Representatives delegations and the state senate and legislatures for each year since 1990, using wikipedia and such other sources as I could find. No doubt there are some errors at this stage, particularly in identifying the leanings of state legislatures 15 or more years ago. These errors are minor; it's unlikely that I could mistake Idaho for a blue state or Washington for a red state, for example.

Those two next door neighbors bracket my best ranking of the 50 states + DC by political complexion, from most Democrat to most Republican:

>> bluest: WA DC WV MA AR NJ CA MD IL HI DE
>> next: NY VT IA WI RI MI OR CT ME NC
>> middle: NM MN MT LA COPA NH ND IN TN
>> next: SD VA MS NV AL MO NE KS OK FL
>> reddest: KY OH AZ SC WY AK GA UT TX ID

Let me point out a few things by way of caveats and highlight a few preliminary conclusions.

Conclusion 1: Government is not just New Jersey's growth industry -- it's a growth industry in most states, Democrat or Republican. In fact, it is only in a handful of blue states and territories that government employment has been static or falling: MA, MI, NY, DC, and RI.

Conclusion 2: The predominant pattern in the last ten years has been for employment in goods-producing industry to be declining, in service-providing business to be growing somewhat, and in government to be growing fastest of the three. That pattern is seen in no fewer than 37 states: AL, AK, AZ, AR, CA, CO, CT, DE, FL, GA, IL, IN, IA, KS, KY, MD, MS, MO, NE, NV, NH, NJ, NC, OH, OK, OR, PA, SD, TN, TX, UT, VT, VA, WA, WV, and WI; in MI it was declining but less than other employment. Government is growing at the expense of goods production. In the limit, this places fiscal drag on the economy, which reinforces the original trend and makes it worse. That is our New Jersey experience.

Conclusion 3: The states that have experienced the greatest declines in employment in goods-producing industry are (worst first): RI, MI, NJ, CT, NY, NC, OH, ME, MA, and PA. Mostly northeastern/midwestern, mostly unionized, and mostly Democrat.

Conclusion 4: The states that have done best in growing employment in goods-producing industry are (worst first): NE, CO, NM, SD, ID, MT, UT, WY, NV, ND. Near runners-up were TX, AZ, and OK. Mostly western, mostly right-to-work, and mostly Republican.

Conclusion 5: Only in Wyoming is employment growth in goods-producing industry consistently positive and higher than either services or government.

Caveat: A Democrat is not the same wherever you go, nor is a Republican. A Maine Republican is a very different animal than a Texas or Wyoming Republican; in fact, some say it is a RINO. A Mississippi Democrat in 2009 is not ever the same as a Massachusetts Democrat, nor does he necessarily resemble a Mississippi Democrat of twenty years ago.

Caveat, speaking of Massachusetts: In connection with the special election there on 1/19/2010, I and many others have taken to calling the Bay State "the bluest of all blue states." This is incorrect. Massachusetts yields to the blueness of the Washingtons (state & district) and West Virginia.

Caveat: Employment in goods-producing industry is not a holy grail and need not be the object of all economic policy. If someone leaves a job in the declining textile industry in North Carolina, retrains as a radiological technician and gets a better job in that field, no one argues that either that person or the state of North Carolina are worse off. The problem is when employment in the goods-producing sector as a whole is in total headlong decline. That means industry is giving up on a place. That means industry prefers to take its chances with the Chinese Communists than the Michigan Democrats.

Caveat: Productivity has improved in goods producing industry, meaning fewer workers are needed to do the same or greater work. I know that, of course. It's wonderful. But rising productivity itself should incentivize capital to come into a place and employ workers who have worked themselves out of their previous jobs. If it's not enough, other things are wrong, and the benefit of workers' productivity is not for workers to share. Politicians must ask the question, what else is needed to attract and retain industry? Republicans always ask that question. Democrats ask instead what other self-defeating social costs and regulations they can impose on job-creating enterprise, and the dismal results are there to see.

Here's one final caveat, and it is important. I don't know which way the causation runs. I am not sure whether the growth states of the West are Republican because they are prosperous, or prosperous because they are Republican. I am more certain that employment grows in right-to-work states because it can, without restriction; that's just economic common sense. "Capital goes where it is welcome and stays where it is well treated," as the great Milton Friedman said.

This much is clear. The employment restrictions and the class struggle nonsense offered by those friends of the working man, the Democrats, are utterly failing him. In the the Democrat fastness of the post-industrial Northeast and Midwest, there's little tangible economic return from workers' long-term political investment.

I say if you want to work, go R. If you want to stand on the unemployment line complaining about the Man, go D.

_______________________

Notes:

1 My original post was inspired by William McGurn's article in the December 30 2008 edition of the Wall Street Journal, "New Jersey Is the Perfect Bad Example".

2 Next best alternative ranking is so similar to the first. Different methodology; of course the data set and workings are available:

>> bluest: DC WA WV MA AR MD CA HI NJ DE VT
>> next: IL RI NY MI OR CT IA WI LA NM
>> middle: NC ME MN ND MT IN PA VA NV CO
>> next: TN AL SD GA NH KY MS MO FL NE
>> reddest: AZ KS OH TX OK AK SC WY UT ID

3 It was Ted Kavadas, proprietor of the Economic Greenfield blog, who suggested doing the study nationally.

Updaate: Saab is saaved!

2010-01-26T13:19:00.000-05:00

GGMM haas found a buuyer for Saab.

American Disease, 2010

2010-01-18T08:07:00.002-05:00

Ann Elk: Where? Oh, what is my theory? This is it. My theory that belongs to me is as follows. This is how it goes. The next thing I'm going to say is my theory. Ready?

TV Interviewer: Yes.

Ann Elk: … This theory goes as follows and begins now. All brontosauruses are thin at one end; much, much thicker in the middle; and then thin again at the far end.

(From Monty Python’s Flying Circus)

I too have a theory, which is to say it is a theory and it is mine. I hope it’s a bit less silly than Ann Elk’s theory, but in any case let’s try it on. The next thing I’m going to say is actually not my theory, but another theory, which is someone else’s and got me to thinking about my theory.

This other theory is something called Dutch Disease, which is an economic diagnosis of the Netherlands’s loss of competitiveness in goods producing industries following a 1959 discovery of natural gas off its North Sea coast. In the simplest terms, this led to inflows of investment, which pumped up the exchange rate and altered terms of trade in such a way that exports became uncompetitive. In this perverse fashion, Dutch Disease describes how a lucky strike in natural resources creates not employment and growth but unemployment and stagnation.

America, my theory proposes, has a version of that, only the resource is money. I want to name the problem “American Disease,” but I read in an article by Bryan Caplan that that's the name of a syndrome of Americans living beyond their means. Actually the problem I pose is closely related, just as H1N1 influenza is closely related to other strains of the flu. Perhaps I can say “American Disease, 2010” to differentiate it from old established strains, or should I call it “California Disease” to reflect the fact that the disease has advanced furthest in the Golden State?

America is a country with real natural resources, of course, but the high costs of extraction and environmental compliance and restrictions on land use places them increasingly out of reach. In the days when the country did produce resources and processed them into manufactured goods which foreigners bought, the U.S. generated a vast amount of wealth, much of which was invested in buildings and infrastructure. These remain visible in the present day, residual wealth as monuments to our peak of economic power.

(Exactly the same is true of Argentina, by the way, which was the wealthiest country in the world 100 years ago and still has the buildings and boulevards to prove it, even though Mr. Juan Peron and the generals set the country on an unusual course from first world to third world status.)

Now, even after the financial crisis, America’s most important industry is finance, broadly defined. The financial industry differs from the auto industry and the chemicals industry in one interesting respect. The auto industry inputs steel, glass, and plastic and outputs autos; the chemicals industry inputs primary and intermediate materials and outputs finished chemical products – in other words, they work on raw and intermediate goods and change them into something else. Most industries do this. But the finance industry has money both as input and output – it changes money’s form but not its nature in its processes. Money is both the input and the output, the resource base and the finished product.

The American finance industry is competitive, one of the nation’s success stories in terms of services exports. Our political class, which increasingly impedes us from taking coal out of our mountains, irrigating our farmlands, and manufacturing products with processes that are not squeaky clean, has long promoted clean, non-polluting financial services, and it has prospered as the industry prospered.

However, I believe that too much money in an economy based on financial services has given us a condition akin to Dutch Disease. It could probably be shown that the maintenance of the U.S. as a financial center has made the American dollar stronger than it would otherwise have been, reducing our competitiveness in global markets for tradeable goods and services. Moreover, the high level of compensation in the financial industry and supporting services has probably driven up wages and benefits right across the U.S. labor economy, another blow to the competitiveness of any entrepreneur bold enough to defy the odds and manufacture a product for sale in America.

While the American political class stands in the way of development of our (real) natural resources and domestic manufacturing, it does see the residual financial wealth of the nation as a resource that it can cut and drill and strip mine – endlessly, in fact, as it recognizes no restraint on the size of resource, but treats it as effectively infinite. The people entrusted to run the country give no thought to the necessary diminution of the resource as taxes, penalties, and compliance costs leave less and less to reinvest, even as the potential returns on investment are inevitably being reduced. They use static models that fail to capture the fact that producers will not produce – or innovate, or hire – out of sheer altruism and public spirit while the returns on their capital and labor are collapsing.

The impoverishment of the United States by the Argentine model is thus well under way.

Oh, and why do I say California has the most advanced case of the “American Disease, 2010?” Well, just look at the Golden State. There is oil offshore, but its development is not permitted. Manufacturing is being driven out. And the Central Valley is experiencing 40% unemployment in agriculture in order to protect mudfish habitat; but California's fiscal position continues to deteriorate as its political class absolutely will not live within its means, as dictated by the state’s reduced economic circumstances.

As California is the United States only more so, California’s political class is America’s in microcosm, with all its pathologies subjected to magnification.

The mindlessness with which the American money resource is to be run down puts me in mind of a passage from Atlas Shrugged:

As they proclaim their right to consume the unearned, and blank out the question of who's to produce it—so they proclaim that there is no law of identity, that nothing exists but change, and blank out the fact that change presupposes the concepts of what changes, from what and to what, that, without the law of identity no such concept as 'change' is possible. As they rob an industrialist while denying his value, so they seek to seize power over all of existence while denying that existence exists.

The establishment in the bluest of blue states, Massachusetts, . . .

2010-01-16T10:53:00.004-05:00

. . . is so accustomed to referring to the seat being contested in the special election as "Teddy Kennedy's seat" that the supposedly even-handed moderator of the debate, David Gergen, used that construction in questioning Scott Brown. To which Scott Brown replied with the soundbite of the night: "It's not the Kennedys' seat, it's not the Democrats' seat, it's the people's seat."

Slam dunk. Gergen knew he'd been stuffed, and is honest enough to say so.

The American Revolution would never have happened without the radicalism of Massachusetts as its animating force. Over time, their radicalism has morphed from the robust libertarianism of the founders to the effete leftism of the college campus, and ironically the people who led the rebellion against Divine Right of Kings have settled into the habit of ratifying the Divine Right of Kennedys.

It could end on Tuesday. Now that would be another American Revolution.

Scott Brown, Republican candidate for senate in Massachusetts . . .

2010-01-11T21:44:00.003-05:00

. . . raised $1 million on the internet with strong support of the #tcot #SGP #ocra gangs on twitter.

He did this -- we did this -- in the bluest of blue states.

Change is coming to America.

¡Nuevo! Read Reed Hundt's book, "In China's Shadow."

2010-01-11T14:04:00.002-05:00

If you want to understand Democrat fantasies in the absence of financial constraint or common sense, read Reed Hundt's book, "In China's Shadow." Reed Hundt is a permanent member of the American politcal class, a Yalie, a partner in a high-powered law firm, head of Bill Clinton's FCC, and a member of Barack Obama's transition team.

Free money is Reed Hundt's great idea.

Here's how it works. Muggins, that is you & me, the hard-pressed American taxpayer, should buy everyone from Nome to Tierra del Fuego a pension, healthcare, and education. By these means, the United States will win in the economic competition with China that furnishes the title of his book and a small fraction of its other content.

No, it's not a joke! He is being serious -- if you're an American with a job, you should spread the wealth around the hemisphere.

The leftist cabal currently in power and the pointy-headed intellectuals who influence them really think this way.

Shutters are closed up & down Main Street but Wall Street is in the money.

2010-01-11T09:18:00.006-05:00

Shutters are closed up and down Main Street but Wall Street is in the money. How could that be? The bull market in stocks has gone farther for longer than I thought possible.

Just surveying the salient points of the economic situation in 2009 led me to a more bearish view. The anti-business party controls the presidency and both houses of Congress, and they are turning the bad US fiscal situation disastrous. They are in love with budget-busting, price-increasing government solutions: stimulus programs that are really giveaways to Democrat constituencies, universal health care, a cap-and-trade energy regime. But in the hard-pressed profit-seeking sector, labor faces an employment outlook as bad as any time in the last twenty-five years, and the government's response is make-work schemes that waste money and; management is unable to plan in the rapidly changing tax and regulatory environment.

So again, what possible reason is there for the stock market to rally this hard? It must be discounting a much better day ahead, a day that according to a strict economic accounting is not easy to see. I said in July:

Some of this bounce is almost certainly due to the business and investment interests of this country re-assessing President Obama's grand and ambitious schemes and concluding that they represent impossible over-reach. Rightly or wrongly, they came around to the view that most of this stuff will never come to pass. On this view, Obama has expressed extreme initial positions just as a negotiating tactic to get more than he could with conventional bipartisanship, but less than he asks. Republicans and responsible Democrats in Congress will push back on the crazier ideas. The American people will not go along, will resist with mute passive aggressiveness and loud argumentation, once the full implications are clear. And if it is not just a tactic, if Obama really insists on every bit of what he says, Republicans will gain enough seats in 2010 to apply the brakes, if not an outright majority. One way or another, the entire Obama agenda can and will be resisted.

As the popularity of Barack Obama, congressional Democrats, their radical leftist economic schemes and unconstitutional power grabs plumb new depths, this is seeming more and more likely. They have mounted a counter-revolution to the American Revolution, and Americans are not standing for it.

Without doing anything to deserve it, the nominally pro-business, nominally loyal opposition Republicans stand to benefit from the ass-whipping American voters are fixing to administer to Democrats in November. To really capitalize, the Republican leadership needs to learn from the Tea Party movement, which has emerged over their heads as the true opposition to the schemes of the left. If the leadership gets smart and understands that the American people demand a response to fiscal sanity, national security, and constitutional government, their recovery can be remarkable and enduring.

Of course the poet WB Yeats used the language better than I can when he told his political opponents in the Seanad Éireann:

You victory will be short, and your defeat final, and when it comes this country will be transformed.

Ardently to be wished.

Comment on Gateway Pundit: Democrat-Leninists

2010-01-10T11:13:00.002-05:00

Senator Paul Kirk (D-MA), appointed to warm Ted Kennedy's seat until a special election can be held for someone to serve the remainder of the term, says he will not yield the seat to the Republican Scott Brown before the vote on health care reform should Brown defeat the Democrat Martha Coakley.

To the article Scott Brown Releases Statement on Appointed Sen. Kirk’s Intentions to be 60th Vote I contributed a comment:

It would be more honest for the Democrat party to drop all pretense to a connection to democracy and change their name to the Leninist party instead.

Theirs is the pursuit of power for the straightforward purpose of exercising power. To that end, they will frustrate the freely expressed will of the people in the democratic process, if that is what their exercise of power requires. They will subvert the process using ACORN and similar proxies. They will dilute the votes of those opposed to their power grab by giving citizenship freely to large numbers of aliens from foreign political cultures in which their kind of political and economic manipulation are a way of life.

If they win, America has lost.

I go into the definition of Leninism in the China book on which I am working.

The Chinese Communist Party was and is above all a Leninist party, a vanguard revolutionary party professing to exercise power on behalf of the people’s democratic dictatorship. Stripping away all the ugly Soviet jargon and everything extraneous, what that means is that its essence is pure power, for as Lenin said, “Dictatorship is rule based directly upon force and unrestricted by any laws.” [The Proletarian Revolution and the Renegade Kautsky, Foreign Languages Press, 1972, p11] (Emphasis added.)

Charlie Manson in the Insurance Business?

2010-01-07T11:42:00.000-05:00

GM is shutting down Saab

2009-12-18T10:59:00.001-05:00

It's saad.

12 naughty ways to economize at Christmas [link]

2009-12-13T12:38:00.004-05:00

Via the terrific Girl on the Right Blog, these helpful suggestion from A. Nonymous:

Most of us are not doing God’s work trading credit derivatives at Goldman Sachs. You may be stunned when I tell you this, because I sure as heck was when I found out: the TARP program covers none of our credit card bills. Like, zero. All of that means another tough, tough Christmas, money-wise. The desperate economy calls for desperate measures to economize at Christmas. Here are twelve ways for the twelve days:

1. The first thing to do is to keep doing more of what you’re already doing: bitching and complaining. Cry poor mouth to everyone. Tell everyone you know how tough it is. Make a Bill Clinton face while you share people’s pain and make them feel yours. Next you say, “You know, let’s make it easy this year, you don’t have to buy me anything.” Of course, that means you don’t have an obligation to buy them anything! That works with everyone except your kids.

2. Tell your young kids Santa’s not real. Kids as young as four are old enough to get real in this day and age. In Indonesia and Pakistan kids are out sewing soccer balls to support a family at that age! So just explain to them that it’s all a scam meant to con them into good behavior, tell them how much you know they wouldn’t want to connive in such a fraud, and assure them you know they’ll behave perfectly well without bribery. They’ll thank you. Someday.

3. What about the older kids? They’re all so eco-conscious these days, and that’s an opportunity for the canny cheapskate. Just tell them instead of lame games for Wii and Xbox this year, you’re saving the planet on their behalf by planting a tree with their name on it in the Amazon! You can even work up some kind of authentic-looking certificate on the computer! People in the carbon-credit business are becoming billionaires doing just that, by the way.

4. You still feel you need some real gifts? Well how about re-gifts? You’ve been given things you never opened — herbal soap, crème brûlée mix, thermal bags for keeping wine cold — pass the parcel! Just try to remember not to give it to the person that gave it to you!

5. Books are such a popular item at Christmas. So many books can be had for free! Libraries put out boxes of new, unread, unmarked books that they want to get rid of. These include books about business, money, and investing that are still very attractive and were timely when they were published last year, but are entirely irrelevant under current conditions. Also look for container-loads of books about the Bush and Clinton administrations, and anything by Dick Morris. I don’t normally advocate illegal behavior, but one exception could be Saul Alinsky’s Rules For Radicals. Bookstores are full of this one – it’s the Obama playbook! Somehow it just seems right to go in there and liberate a copy or three, comrade!

6. One of my cheap-ass friends used to always joke, “I wanted to buy you a big plant for Christmas, but GM wouldn’t sell.” What a laff riot, and it got him off the hook for ever buying anything! Of course, now GM desperately wants to sell all its plants, so the 2009 revision of that joke is, “I wanted to buy you a big plant for Christmas, but the Chinese bought them all!” Ha ha! Your friends
will be falling over, and they won’t even notice you didn’t buy a round of drinks!

7. Speaking of drinks, ‘tis the season to bend the elbow, so herewith some recommendations from Chateau Wang. First, drink cheap beer. The cheapest stuff in my local is also the original and greatest . . . it’s Miller at $3.99 a six-pack, compared to $5.29 for Miller Light. That make any sense to you? Me neither, they take stuff out and charge you more? Forget that! Next, drink cheap wine. André’s Cold Duck is back, it’s $4.99, and it’s as good as it was when you were fourteen and sneaked it in the kitchen after the Thanksgiving dinner was cleared away. (You know you did.)

8. As for food, the trick to economizing on food is not to cook any. Instead, head over to your brother’s house and scrounge Christmas dinner there. You need to go unannounced, early in the day, in case they have the same idea of coming over and scrounging from you. If that was the plan and your sister-in-law makes no move to put a turkey in the oven, give her one of your Miller’s and she’ll at least come through with some Dinty Moore. Note: If you were to show up on the doorstep at 7:00 AM, there are secondary benefits – you can reconnect with the Christmases of your childhood, when you punished everyone by getting up too early, and you’ll get breakfast too.

9. Here are the hard liquor recommendations from Chateau Wang. You want to drink cheap, cheap liquor too. The venerable and cheap bourbons and ryes from Old Huckaby, Rebel Heaven, and Elihu Walton lack the sophistication of single-malt Scotch, but they have all of the wallop! Also consider cheap and nasty tequila like Don Cheech and Señor Pepe brand – they mix great with green Gatorade!

10. You don’t feel you can scrounge 100% at your sister-in-law’s house? Try this recipe that will cost about 25 cents: Mix two cups of flour with a quarter teaspoon each of baking power and salt, and add up to two cups of water to make a heavy dough. Add a few raisins if you have any, tie it up in a clean handkerchief, and boil it in water until it’s time to go home. Then discard it. Tell them it’s
the dumpling Oliver Twist had in the workhouse at Christmas. Your brother’s family doesn’t read! They won’t know! Ha ha! Give them a copy of Rules For Radicals.

11. Christmas trees are $60 at the VFW, and wreaths are $20. That make any sense to you? Me neither, so here you have many ways to go. You could wait until 4:30 on Christmas Eve, by which time the guy working at VFW will have gone home and abandoned whatever Charlie Brown Christmas trees he has left. Freebie! Option two, you may live in a place where trees are plentiful all around – neighbor’s yards, parks, and so on, if you “catch” my “drift” (wink wink!) Freebie! Another idea, if Border’s Bookstore actually survives far into this Christmas season, you may be able to buy one of the jokey artificial trees they had there last year – these things were some kind of intellectual joke, made with like a few bare wires covered in tinsel; this choice shows a certain post-modern hauteur which goes very well with Dinty Moore and Cold Duck. It’s about $5.99. But you can make it yourself, using wire coat-hangers, spray adhesive, and metallic flock or confetti. That’s a good thing!

12. Finally, we have to get control of this holiday again. Twelve days my wonderful arse! Our Jewish neighbors get by with just eight nights for Hanukkah, and even that is way too much noodle pudding. Let’s do away with this business of Christmas as a 3-month long retail opportunity. The retailers have been unloading container loads of useless crap from Yiwu, China into their Christmas displays since just after Labor Day! With the cheap and nasty Christmas I have outlined here, we can let them know that that is just not the way we want to be living anymore.

Have a happy.

The Chinese peasant under Socialism said,

2009-12-05T10:59:00.000-05:00

"We are being roped together to live a poor life."

(Zhang Yulin reports, in Lin & Chao)
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Jobs Summit at the White House

2009-12-03T10:24:00.004-05:00

From Politico 44: You're invited -- On the jobs summit list ...

"CONFIRMED ATTENDEES INCLUDE: Eric Schmidt, Google; Randall Stevenson, AT&T; Surya Mohapatra, Qwest ; Frederick Smith, Fed Ex; Brian Roberts, Comcast; Bob Iger, Disney; James McNerney, Boeing; Andrew Livens, Dow; Peter Solmssen, Siemens; Stephanie Burns, Dow Corning; Phaedra Ellis Lamkins, Green for All; Reed Hundt, Coalition for the Green Bank; Larry Mishel, EPI; Alan Blinder, Princeton; Paul Krugman, Princeton; Joe Stiglitz, Columbia; Bob Greenstein, Center on Budget and Policy Priorities; and Jeffrey Sachs, Columbia. PLUS SMALL BUSINESS OWNERS, including David Ickert, Air Tractor; Woody Hall, Diversapack; and Rose Wang, Binary Group. AND Anna Burger, Change to Win; Leo Gerard, United Steel Workers; Joe Hansen, United Food and Commercial Workers; Randi Weingarten, AFT; Mayor Frank Cownie, Des Moines; Mayor Julian Castro, San Antonio; and Mayor Ed Pawlowski, Allentown, Pa."

In other (Grayling) words, we have (1) big contributors whose large corporations have been laying off workers, (2) union leaders who represent barely one-in-ten US workers and whose grasping has sent jobs overseas, (3) leftist economists, (4) war-horses of the DC policy establishment, (5) members of the red-green coalition, (6) political allies, and (7) a few small business people of whom nothing is known.

THE CRISIS IN EMPLOYMENT IS REAL. Nothing that will come out of this jobs summit will have any effect on it, however. Exhorting industry to hire will not. Shaming banks into extending more credit to business will not. Temporary subsidies and $3000 new-hire tax credits will not. Make-work schemes will not. Enterprises will not hire or commit any new resources as long as their tax and regulatory regimes are totally unsettled, as they are with this anti-enterprise statist administration. Business owners do not know what they face in terms of higher taxes and giant mandates for health care, cap-and-tax, and other pet "make-the-rich-pay" schemes of the left. But they do know for certain that these things will be burdensome, and maybe fatal. No sensible business person will hire or invest under such threat.

Better to milk your business for cash to consume while you can. Maybe now's the time to move offshore. The Chinese Communists are more business friendly than the US Democrats, and probably easier to deal with than the United Steel Workers or United Food and Commercial Workers.

It is easy

2009-10-29T10:31:00.001-04:00

. . . to find fault with any work.

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Mao nostalgia in China

2009-10-20T12:35:00.005-04:00

On October 1, the People's Republic of China marked its 60th anniversary with an impressive military parade, musical performances and portraits of Sun Yat-sen, Deng Xiaoping, and Mao Zedong.

It's the occasion for a boomlet for Mao nostalgia in China. This, one can kind of understand. He was the founder of the PRC. After liquidating his rivals, he was the maximum leader of the Chinese Communist Party.

Here's today's article on the nostalgia for Mao in China: Mao presides again in China as nostalgia runs high. It's fun stuff. Young people who don't know more about him than his name and image are taking the commercial opportunity to sell T-shirts, hats, badges and snow globes.

In the US, within the Obama administration, Mao Zedong is also enjoying a revival. Communications Director Anita Dunn commends him as a political philosopher to the graduating class of a parochial school. Manufacturing Czar Ron Bloom cites with approval Mao's saying that "Political power grows out of the barrel of a gun" ["Problems of War and Strategy" (November 6, 1938), Selected Works, Vol. II, p. 224].

The thing is this. In China, it is not Mao's Communism that is being celebrated; the country has spent the last thirty years correcting the leftist errors of the previous thirty. Apart from the retail opportunity, Mao's real reputation in China is as a nationalist (not a Nationalist, which in China is a different thing):

1 Mao would work with anyone, anywhere to resist Japanese aggression, including the Nationalists or the Americans, even to the extent of putting the Red Army under their command.

2 Mao unified the war-torn Chinese mainland under Chinese rule for the first time since 1644.

3 In its first five years, the PRC under Mao was drawn into superpower conflict with the US in Korea, and managed to stay in the fight with the nuclear-armed US to secure a draw on the peninsula.

4 When Mao fell out with Khruschev, the PRC found itself surrounded by enemies: the USSR to the north, Taiwan with its US backing to the east, India with its designs on Tibet and implicit backing of the UK, US, and USSR to the south. Mao prosecuted a war in the Himalayas and backed them all down, sustaining the country's independence through a dangerous time.

5 Forty-five years ago this week, the PRC got the bomb; if any of the other powers thought attacking China would be easy, after that it meant mutually assured destruction.

6 When the time came for a new way forward, Mao came to terms with Richard Nixon, and it was easy for the two cold warriors, as if getting reacquainted with old friends. This upset the balance of power in the far east, putting the USSR on the defensive. As much as the US played the China card, China played the America card.

Seek truth from facts, as Deng Xiaoping always said. Mao Zedong's reputation in his homeland has very little to do with his Communism at this stage, and everything to do with his nationalism. Which is fine -- it is his homeland after all.

But like many others, I would like to know just what it is that his highly-placed admirers in the US Obama administration are getting out of Mao Zedong at this time.

From Alphaclone via SeekingAlpha: Galleon Group's 50 Largest Holdings

2009-10-19T09:28:00.001-04:00

My first employer on Wall Street was the world's largest pension fund; my second, the fastest growing hedge fund. When I was at the first and interviewing for the second, I had this idea that the best hedge fund were investing on some higher plane, with qualitatively different instruments and strategies put to use by people who were just altogether smarter than those of us at conventional money managers. Once I was in a hedge fund, I realized that these people put their pants on one leg at a time, that they were subject to all the usual range of human abilities and weaknesses, and that their funds may or may not be better though they certainly were more expensive for clients.

Galleon's top fifty holdings list from earlier in the year is utterly ordinary.

Wyeth went the way of all flesh on Friday; now part of Pfizer.

keywords: Hedge Fund

Sent to you by D H via Google Reader:

Galleon Group's 50 Largest Holdings

via SeekingAlpha.com: Home Page by AlphaClone on 10/18/09

AlphaClone submits:

The founders of the Galleon Group, a hedge fund started in 1997 and which has a technology and healthcare focus, have been charged with insider trading. Galleon is one of the 250 hedge and institutional investment funds that are available on AlphaClone. The fund's Top 10 Holding Clone, which invests quarterly in the the fund's ten largest holdings at the time they are disclosed, is up 48.2% so far this year but has not performed very well over time returning a negative 3.9% annualized over five years and a dismal negative 18% annualized since 2000 (all returns as of 10/15/09 close). We thought we'd list the fund's 50 largest holdings below (as of 6/30/09). Now that the fund will almost certainly wind down, perhaps there are some good short opportunities.

	Name	Ticker
1	EBAY INC	EBAY
2	GOOGLE INC	GOOG
3	APPLE INC	AAPL
4	OSI PHARMACEUTICALS...	OSIP
5	BANK OF AMERICA COR...	BAC
6	JP MORGAN CHASE & CO	JPM
7	CISCO SYS INC	CSCO
8	SPDR S&P 500	SPY
9	DELL INC	DELL
10	NVIDIA CORP	NVDA
11	E M C CORP MASS	EMC
12	WYETH	WYE
13	PEPSI BOTTLING GROU...	PBG
14	MEMC ELECTR MATLS INC	WFR
15	First Solar Inc	FSLR
16	VERISIGN INC	VRSN
17	YAHOO INC	YHOO
18	ELECTRONIC ARTS INC	ERTS
19	SPDR Gold	GLD
20	INTEL CORP	INTC
21	QUALCOMM INC	QCOM
22	COGNIZANT TECHNOLOG...	CTSH
23	FORD MTR CO DEL	F
24	NATIONAL SEMICONDUC...	NSM
25	NETEASE COM INC	NTES
26	SUNTRUST BKS INC	STI
27	TYCO INTERNATIONAL LTD	TYC
28	TERADYNE INC	TER
29	RESEARCH IN MOTION LTD	RIMM
30	ALCON INC	ACL
31	HEWLETT PACKARD CO	HPQ
32	VISA INC	V
33	AMAZON COM INC	AMZN
34	BIOGEN IDEC INC	BIIB
35	NOVELLUS SYS INC	NVLS
36	ANADARKO PETE CORP	APC
37	COMMSCOPE INC	CTV
38	FTI CONSULTING INC	FCN
39	PEPSICO INC	PEP
40	ABERCROMBIE & FITCH CO	ANF
41	F5 NETWORKS INC	FFIV
42	LAM RESEARCH CORP	LRCX
43	LEXMARK INTL NEW	LXK
44	GAP INC DEL	GPS
45	Seagate Tech	STX
46	YINGLI GREEN ENERGY...	YGE
47	RADIOSHACK CORP	RSH
48	KLA-TENCOR CORP	KLAC
49	FIDELITY NATIONAL F...	FNF
50	ALLERGAN INC	AGN

Complete Story »

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Malevolence? Stop the insanity!

2009-10-16T07:31:00.003-04:00

“There has to be a counterweight to the malevolence of the insurance industry.” So says Senator Jay Rockefeller to mop-topped interviewer Al Hunt of Bloomberg.

Malevolence? What's next out of the mouth of the Democratic senator from the state of Tourette's syndrome?

You will wait in vain for the industry to fight back hard against this Alinskyite campaign of vilification. Like all other industries that depend upon the US government to treat them with minimal sanity, the insurance industry deals with Uncle Sam the way you would any other lunatic with a trunkful of loaded guns . . . veeeeeeeeeery caaaaaaarefully, for fear of pissing off the lunatic and having him go berserk.

This is the state of play for all owners of capital in the United States today. They hold their breaths; they hold their tongues; they even contribute to the lunatics' campaign, hoping it will buy them some goodwill! Look how well that has worked for you, health insurers -- you're public enemy number one.

The last trade association leaders who was any damned use at all to his membership was the late Jack Valenti of the Motion Picture Association of America.

General Electric profit slumps 44%

2009-10-16T07:20:00.003-04:00

from Marketwatch: General Electric profit slumps 44%

Financial business being run down rapidly, industrial business, a basic GDP play, seeing 8% lower revenues from the year ago period.

The pre-eminent American industrial company manages decline.

Book extract on Chinese history

2009-10-13T12:58:00.003-04:00

China’s people take pride and inspiration from their history, but it can be burdensome too in some respects. The Sinologist Lucian Pye referred to “the millstone of greatness”, noting that “awareness of the greatness of Chinese civilization, together with an appreciation of the distinctiveness of ‘Chineseness,’ is universal”, not least among the Chinese themselves. They never forget that they are the heirs to a unique, identifiably Chinese civilization which arose in the valley of the Yellow River and endured continuously through the last four thousand years of recorded history. On the one hand, the burden is to have so much to live up to; on the other, it is a source of considerable frustration that their universally acknowledged greatness has so seldom translated into peace, prosperity, and a good life for the Chinese people.

Lu Xun, China’s great modern writer and scathing social critic, captures that frustration as he dismisses the entire enterprise of Chinese historiography:

But however fine the phrases of those splendour-loving scholars, or however grand the expressions they use in their chronicles, such as "the rise of the Hans," "the age of Han expansion," or "the age of Han resurgence," while appreciating that their motives are of the best, we cannot but feel their wording is too ambiguous. A much more straightforward mode of expression would be:
1. The periods when we longed in vain to be slaves.
2. The periods when we succeeded in becoming slaves for a time.

These periods form a cycle of what earlier scholars call "times of good rule" and "times of confusion." [Lu Xun National Characteristics 2 150-]

Lu Xun was writing his polemics during yet another time of confusion, after one Chinese empire had fallen, before what was to come had really taken shape. If he was not a man of the left, he certainly admired the Soviet Union and thought its model worth considering for the modernization, democratization, and independence of China. He includes a reminder to us that down through the ages, the great historic achievements of great men were the endeavor of one-twentieth, one-fiftieth, or as little as one-hundredth of the population, of no positive moment to the great mass of the Chinese people who labored mutely on the land, desperately trying to stay alive, produce enough to pay taxes, and escape undue attention of the Emperor’s officials. But when the great men failed or turned out to be evil men, it was the common folk who paid with their lives, hundreds of millions of lives, so many that the mind simply balks.

Book extract on Confucius & The Way

2009-10-11T08:53:00.000-04:00

The Chinese concept of the Way, or Tao, was current before Confucius lived or taught; the Books of Odes and Rites tell of Heaven, and reveal beliefs in ancestor-spirits and a supreme being with a human face. However, Tzu-kung reports that “one cannot get to hear [Confucius’] views on human nature and the Way of Heaven. (V, 13, 78) Confucius does not conjecture about the nature of God or Heaven, but he felt the full force of Heaven’s Decree upon him, and suggested that shame is the feeling of falling afoul of the Way of Heaven: “When you have offended against Heaven, there is nowhere you can turn in your prayers.” (III, 13, 69) The subject of Confucius’ teaching is not the nature of man, but man’s conduct. It is not the Way of Heaven in the sense of ultimate truth about the universe, but rather in the most down-to-earth sense of each person and each state acting dutifully, benevolently, in compliance with the Rites, outward form conferring inward grace. Confucius’ Way is in no means mystical. It can be learned, and taught. “The Gentleman . . . goes to men possessed of the Way to be put right. Such a man can be described as eager to learn.” (I, 14, 61) The fact that Confucius’ conception of the Way relies on learned forms rather than mystical revelation does not make it any less a matter of life and death:

The Master said, “He has not lived in vain who dies the day he is told about the Way.” (IV, 8, 73)

When the ruler governs according to the Golden Mean, observes the Rites, and follows the Way, he brings his state to a condition of harmony, for “when the Way prevails in the Empire, the Commoners do not express critical views.” (XVI, 2, 139) In this dialogue with the senior minister of the State of Lu, Confucius asserts that the Way is all the ruler needs, rebuking the Legalist School of philosophy and every gang of thugs and killers to assume power from his own time down through the ages:

Chi K’ang Tzu asked Confucius about government, saying, “What would you think if, in order to move closer to those who possess the Way, I were to kill those who do not follow the Way?

Confucius answered, “In administering your government, what need is there for you to kill? Just desire the good yourself and the common people will be good. The virtue of the Gentleman is like the wind; the virtue of the small man is like the grass. Let the wind blow over the grass and it is sure to bend.” (XII, 19, 114-115)

With his reverence for precedent and antiquity, his abiding conservatism, and his conception of a hierarchical society led by benevolent example, Confucius could be either an instrument or an impediment to the rulers of China. To some, he was both at the same time.

Read Reed Hundt's book, "In China's Shadow"

2009-09-09T09:09:00.000-04:00

If you want to understand Democrat fantasies in the absence of financial constraint or common sense, read Reed Hundt's book, "In China's Shadow." Reed Hundt is a permanent member of the American politcal class, a Yalie, a partner in a high-powered law firm, head of Bill Clinton's FCC, and a member of Barack Obama's transition team.

Free money is Reed Hundt's great idea. Muggins, that is you & me, the hard-pressed American taxpayer, should buy everyone from Nome to Tierra del Fuego a pension, healthcare, and education. By these means, the United States will win in the economic competition with China that furnishes the title of his book and a small fraction of its other content.

No, it's not a joke. People with power and influence really think this way.

Does Cash-For-Clunkers tell anything about Healthcare Reform?

2009-07-31T10:20:00.004-04:00

Last night the government announced it was suspending the Cash-For-Clunkers program. In my twitterstream I reacted as follows:

dhsmith24 Cash for clunkers suspended w/i a week. What the heck are these guys doing? And they want to run #healthcare?

The doubt this #fail creates is real enough, but there is more, and Hugh Hewitt has expressed it best:

Just as with the tax credit for new home purchases, consumers altered their behavior when presented with an opportunity. Democrats thus have received a second example of an iron law of economics: People respond quickly to significant cash incentives.

The Democrats never get this. They never believe economic actors respond to incentives. There are alway massive unitended consequences of their great economic projects because they are constitutionally unable to work through all the implications of these projects. Democrats are working on a root-and-branch restructuring of the U.S. healthcare system that cannot work as they have currently proposed, they have passed a Cap and Trade energy restucturing plan that may more correctly be called the China Opportunity Act of 2009, and they think they can raise taxes on producers without limit. In every case they totally fail to reckon with the fact that producers will produce less, arrange their affairs to minimize the tax, or in the limit just bail out -- "Go Galt" in the emerging parlance.

But the people are sovereign, this is what they voted for, so all we in the reality-based community can do for now is speak out against things we know cannot work and hope they can be changed in process.

Dispatches from the Front Lines of the Real Estate Wars (2)

2009-07-31T09:52:00.005-04:00

I have mentioned my misgivings with the Case-Shiller 20 City Real Estate Index before, but everyone now hangs on it monthly and I have had to get on board too.

I have also mentioned that I am a real estate agent in New Jersey with access to the MLS data here, and a keen follower of the trends in local markets.

Case-Shiller was reported on Tuesday this week for the latest month (May). The news was all positive, confirming a four-month improving trend. The index rose one-half of one percent from the April reading, the first rise since 2006. Prices were higher in 13 of the 20 cities surveyed. The year-on-year statistic was 17.1% lower, but that is the first reading better than -18% in several months.

I don't believe anyone wants to forecast a big uptick in prices -- a V-shaped recovery -- but a lot of people are making the bold call that the residential market is at a bottom. For anyone who may have caught the bottom, congratulations! You know the hardest thing to do is to time a market bottom so precisely.

Lately I notice a lot more inventory "under contract". The Case-Shiller data sent me to the MLS to do my usual selling rate to inventory analysis and find out whether macro data confirm anecdotal experience. Do they ever. What I found is that the months of inventory in the local markets I follow has absolutely crashed. In the spring, we were at 10-11 months to clear the active standing inventory. Currently it is more like 5-7 months. Five month's inventory is comparable to the sellers market of a few years back. Wow!

Is there any reason to think the more active market is a blip rather than a trend? I can think of two. One is the action of the $8000 first time home buyer credit, which expires at the end of November and will not be extended. If you want to capture this, you're running out if time. The other is the regular action of the calendar -- every year sales pick up in the spring and close in the summer so that children can be situated in their new school districts for autumn. So let's keep an eye on this to see whether it has legs or causes disappointment later on.